Prepared Partnership prepared the following contribution format income statement
ID: 386951 • Letter: P
Question
Prepared Partnership prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 600 units to 1,800 units):
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $40,000
Variable expenses. . . . . . . . . . . . . . . . . . 24,000
Contribution margin. . . . . . . . . . . . . . . . 16,000
Fixed expenses. . . . . . . . . . . . . . . . . . . . . 12,000
Net operating income. . . . . . . . . . . . . . . $ 4,000
Required:
If the selling price increases by $3 per unit and the sales volume decreases by 200 units, what would be the net operating income?
Please give step by step instructions
Explanation / Answer
Ans:
Current selling price per unit = sales / sales volume
= $40,000 / 1000
= $40
Revised selling price = $40 + $3
= $43
Revised sales volume = 1000 units - 200 units
= 800 units
Variable expenses per unit = $24000 / 1000
= $24
Statement of Net operating income at sales volume of 800 units
Hence the net operating income is $3,200.
Particulars Amount Sales(800 * $43) $34,400 Less: Variable expenses($24 * 800) ($19,200) Contribution margin $15,200 Less: Fixed expenses ($12,000) Net operating income $3,200